The global chip shortage will last for at least another year, warns one of the world’s largest electronics contract manufacturers Flex, as reported by the Financial Times.
Flex (NASDAQ: FLEX) is the world’s third largest such manufacturer and is headquartered in Singapore. The Financial Times report quotes, “The forecast from Flex, the world’s third-biggest such manufacturer, is one of the gloomiest yet for a crisis that is forcing car and consumer electronics groups to re-examine their global supply chains.”
Chip manufacturers are already making huge investments to open new factories. However, the plants will take years to be functional, and hence semiconductor supply will continue to be constrained for few years at least. It is estimated that it takes around two years from breaking ground to the first chips rolling off the production line.
Flex’s executives believe that the situation could improve only if consumers shift from spending on electronics to services, however this seems unlikely.
Largely driven by huge demand for electronic devices, game consoles, printers and other driven by the pandemic and work from home, study from home, the chip manufacturers were never prepared for this.
The Financial Times also quotes Lynn Torrel, Flex’s Chief Procurement and Supply Chain Officer, “With such strong demand, the expectation is mid to late-2022 depending on the commodity. Some are expecting (shortages to continue) into 2023.”
The chip shortage has driven many car manufacturers to cut their production and even furlough staff. Some companies even have adopted an assertive approach to sourcing chip, such as paying for them in advance. The Financial Times also reports that electronics manufacturers in Asia have also recently warned about the chip shortage impacting the TVs, smartphones and home appliances. It stated that the situation is made worse through stockpiling by Chinese groups hit by sanctions.
The warning follows one by an Apple supplier in Taiwan that chip production there will be affected unless the country can get a better supply of vaccines.
Even Michael Dell, CEO of Dell, had stated earlier that the shortage will probably continue for a few years. “Even if chip factories are build all over the world, it takes time”. His statement was backed by Nvidia’s CFO Colette Kress, who asserted that the demand continues to exceed supply for much of this year with chip maker TSMC warning that shortage could last long into 2022.
